Which type of bankruptcy generally involves the liquidation of a company's assets?

The type of bankruptcy that typically involves the liquidation of a company's assets is referred to as "straight bankruptcy." This term is often synonymous with Chapter 7 bankruptcy, where a debtor's non-exempt assets are sold off to pay creditors. In a Chapter 7 liquidation, the process is directed by a bankruptcy trustee, who collects the debtor's assets, evaluates their value, and distributes the proceeds from the sale to outstanding debts.

This approach is utilized when a debtor has no realistic ability to repay debts, thus opting for a fresh start by discharging most unsecured debts after liquidating assets. This option is distinct from reorganization bankruptcies, like Chapter 11 and Chapter 13, which allow businesses and individuals to restructure their debts while remaining operational.